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As markets convulse in response to the global Covid-19 crisis that has resulted in government-mandated shutdowns and social isolation, soaring unemployment and dismal GDP and earnings forecasts, advisors face tough questions. At the extremes, client reactions fall into two main types: fear versus greed.

From anxious investors: Why not just sell now and get out of the market? They feel the situation keeps getting worse, that their losses are mounting, and that there’s no end in sight. By going to cash, they say, a dollar will still be a dollar, no matter what happens. Better to be safe than sorry.

From bold investors: With the stock markets having plunged, isn’t this a great time to buy? These could be people who have recently sold a house or business, freeing up cash, or young people thinking of investing for the first time. For them, these beaten-up stock prices seem too good to pass up, especially if they have no need to sell soon.

Since the bear market began in mid-March, friends have personally asked me both of these types of questions. Because of these and other conversations I’ve had with countless individual investors in the course of my decades as a journalist specializing in retail investing and personal finance, I can relate to what advisors are dealing with now.

As someone who has invested in the financial markets since the early 1980s, and now as a 60-something semi-retiree who has watched his household retirement assets take a significant hit, I can also relate to the pain many investors are feeling.

From the advisor perspective, what’s happening in the markets is superseded by the impact on clients. One client’s crisis, whether real or imagined, can be another client’s perceived opportunity.

Age can be a factor. Younger investors have much longer time horizons than those nearing retirement or already retired. In recovering from market losses, time is on their side. So there’s merit to the argument that younger investors — unless they’re saving up for a short-term goal such as a home down payment — can consider taking advantage of bear market prices.

That’s what I did in 1987, while in my early 30s and in a double-income, no-kids situation; home ownership and children were some years away. In the afternoon of Oct. 19, 1987, my Financial Times of Canada newspaper colleagues and I watched the market meltdown unfolding on the overhead office TV in disbelief.

Undeterred, a week after the crash I invested $12,000 in an equity index mutual fund, via a brokerage account that I’d recently opened. That was hardly a sophisticated move, but it worked out well. Fuelled by unconstrained program trading, the Black Monday selloff had been indiscriminate and overdone, and the 1987 bear market proved to be very short-lived.

Much older and (I think) wiser, I would advocate advising clients to make new purchases in the equity markets only as part of a diversified portfolio that meets their investment objectives and time horizon — and, importantly, their need for liquidity.

I’d also hope that clients would be better served by their advisors than a B.C. teacher I know who is nearing retirement. At the end of February, her broker told her that an S&P 500 index ETF was “very attractive” now that there had been a correction in response to Covid-19 fears. My response was that while a broad-based U.S. equity ETF can be a suitable new purchase as part of a balanced portfolio, there’s no assurance that a broad-market equity fund that has fallen 10% won’t lose another 10% in the short term. Unfortunately, that turned out to be true.

As for the strategy of buy and hold, it’s hard to watch your financial net worth taking a tumble, even if you believe you invested prudently. At home, it was disconcerting to watch a stock portfolio of dividend-paying banks, pipelines, utilities and telecommunications companies, along with well-established ETFs and mutual funds in mostly core asset classes, get drastically marked down — only to rebound sharply for three consecutive days in March before declining once again.

Such is the nature of investing in the public markets. As one ETF executive told me, we’ve been through this rodeo before. The more recent notable bear markets include 2000, when the seemingly never- ending boom in high-tech stocks went bust. And in 2008, the main catalyst was the overleveraged housing market in the U.S. Mass defaults by homeowners, exacerbated by securitizations of purportedly low-risk mortgages, led to a financial crisis that reverberated around the world.

In good times and bad, prudent investors take precautions to reduce their risk. In 2000, this meant avoiding or at least reducing exposure to tech stocks trading at stratospheric valuations. In 2008, it meant being wary of excessive leverage. During both of these bear markets, investors who heeded advice to maintain sufficient liquidity in their financial assets — in the form of cash or other low-risk holdings — were better able to meet their ongoing financial needs without having to sell at fire-sale prices.

For my part, unlike in 1987, I wasn’t a buyer of equities during those two severe bear markets. But I wasn’t a seller, either.

The reason: As has been well-documented in research, it’s virtually impossible to predict accurately the opportune time to exit the stock market. Or, once out, when to get back in. This holds true for both big-time portfolio managers who oversee billions of dollars, and for small investors and their modest life savings.

Retail investors as a group do a poor job of timing their investments. Their investment returns tend to lag those of the asset classes that they invest in. According to a study released in August 2019 by Chicago-based Morningstar Inc., the average U.S. investor in mutual funds and ETFs lost 0.45% a year to timing over five 10-year periods. (The 10-year end dates ranged from December 2014 to December 2018.) For the bottom 10% of investors who made the worst moves, the cost of bad timing might well have been a shocking five or 10 times higher, the Morningstar analysts concluded.

Which brings me back to March 2020, when the 11-year bull market came to an abrupt end. From my perspective, this bear market seems worse than the others I’ve mentioned, and I don’t think it’s just because I’m now in a later stage of my investing life cycle and reliant on my investments for income.

Sadly, what’s different this time around is the drastic human toll: the continuing risk of serious illness and death, and the sweeping impact on all segments of society from shutdowns, cancellations and isolation orders. It’s not just the about the markets or investments. But for financial advisors whose role is to consider how risks and opportunities apply to individual client circumstances, it never is — and never will be.

Editor’s note: Financial journalist Rudy Luukko was editor of Morningstar Canada from 2004 to 2018. He now contributes regularly to Investment Executive.